Good afternoon. My name is Julian and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Micron Technology’s first quarter 2010 financial release conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session period. (Operator Instructions)

It is now my pleasure to turn the floor over to your host, Kipp Bedard. Sir, you may begin your conference.

Kipp Bedard

Thank you very much and welcome to Micron Technology’s first quarter 2010 financial release conference call. On the call today are Steve Appleton, Chairman and CEO; Mark Durcan, President and Chief Operating Officer; Ron Foster, Chief Financial Officer and Vice President of Finance; and Mark Adams, Vice President, Worldwide Sales.

This conference call, including audio and slides, is also available on Micron’s website at www.micron.com. If you have not had an opportunity to review the first quarter 2010 financial press release, it is available on our website at www.micron.com. Our call will be approximately 60 minutes in length. There will be an audio replay of this call.

You may access that by dialing 706-645-9291 and use a confirmation code of 45034396 This replay will run through Tuesday, December 29, 2009, at 5:30 pm Mountain Time. A webcast replay will be available on the company’s website until December 22, 2010.

We encourage you to monitor our website again at www.micron.com throughout the quarter for the most current information on the company, including information on the various financial conferences that we will be attending.

Please note the following Safe Harbor statement. During the course of this meeting, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company and the industry. We wish to caution you that such statements are predictions, and that actual events or results may differ materially.

We refer you to the documents the company files on a consolidated basis from time-to-time with the Securities and Exchange Commission, specifically the company’s most recent Form 10-K and Form 10-Q. These documents contain and identify important factors that could cause the actual results for the company, on a consolidated basis, to differ materially from those contained in our projections or forward-looking statements. These certain factors can be found in the Investor Relations section of Micron’s website.

Although, we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity performance or achievements. We are no duty to update any of the forward-looking statements after the date of the presentation to confirm these statements to actual results.

I’ll now turn the call over to Mr. Ron Foster. Ron.

Ron Foster

Our press release is available on our website. Let me start after the brief summary of the financial results of the first quarter of fiscal 2010, which ended December 3, 2009. The company reported net income of $204 million or $0.23 per diluted share, our net sales of $1.7 billion. This is our first quarter of profitability in the past 12 quarters and is our highest quarterly revenue since Q1 2001, with the profitability from the first quarter, a couple items are triggered.

First some potentially diluted securities become dilutive and are included in a number of shares used to compute EPS. This includes in the money stock options as well as our convertible debt securities. Second, certain accruals for variable pay programs were recognized in Q1, where payouts are tied to financial performance. This expense showed up primarily in SG&A.

In addition, with the beginning of this fiscal year, a couple of new accounting rules are effective for Micron; the cost is to recast prior financial statements to confirm to the new presentation format. First, to the FASB staff position on convertible debt instruments caused us to bifurcate the accounting for our 2007 $1.3 billion convertible security into their separate debt and equity components.

Accordingly, about $300 million was reclassified from debt into additional capital in the equity section as of the beginning of fiscal 2010. The remaining $1 billion balance classified to debt is accreted to the $1.3 billion face amount of the security to step up non-cash interest expense over the remaining term of the security. This resulted in an additional $13 million of non-cash interest expense in the first quarter and will be about the same amount in each of the remaining quarters in this fiscal year.

If you recall, our fourth quarter posted a net loss of $88 million, or $0.10 per diluted shares, our net sales of $1.3 billion. With this increase in non-cash interest expense, the Q4 net loss has been increased to $100 million and $0.12 diluted share. The second item is the reclassification of minority interest, or noncontrolling interest on both the balance sheet and income statement.

On the balance sheet, noncontrolling interest is classified as a component of equity, were previously it was classified in the mezzanine between liabilities and equity. On the income statement, noncontrolling interest is classified below net income and before net income attributable to Micron shareholders.

Note, that the bottom line of our income statement that used to be net income is now called net income attributable to Micron shareholders. In addition of these changes, we have modified the reportable segments you will in our 10-Q filing to include memory and other. This other segment includes our imaging business and some recently initiated activities primarily surrounding our silicon systems groups, which includes LED display and others. Now these activities are individually significant at this point.

Now let’s move onto discuss the results for the quarter. Total sales in the first quarter increased 34% compared to the fourth quarter as a result of higher sales in memory products. Sales in memory products increased 38%, while sales of image sensors decreased 13%.

Imaging revenue was $108 million in the first quarter and represented 6% of the Micron consolidated net sales. Recall of the first quarter results reflect our manufacturing services, including wafer fabrication to Aptina, following a spin off of that business in the fourth quarter. As I mentioned previously, we continue to account for our ownership interest in Aptina under the equity method of accounting.

Memory sales include royalties and technology fees of $35 million, which is roughly flat compared to previous quarter. DRAM sales increased 50%, compared to the fourth quarter to just over $1 billion, primarily due to a 25% increase in bit shipments and 21% higher average selling prices.

Sales of NAND Flash products increased 21%, compared to the fourth quarter to $568 million, primarily due to a 16% increase in sales volume and 5% increase in average selling price. The DRAM quarterly average selling price increased in the first quarter from the second consecutive quarter, after declines in the prior 11 quarters.

The 21% increase in DRAM selling prices reflects the effects of a 32% increased in selling prices for core DRAM products, which was partially offset by the continued mix shift toward core products from the relatively higher price specialty DRAM products. The greater mix of core DRAM products comes mainly from increased volumes from Inotera.

DRAM production costs excluding the effects of the lower of cost of market write-down and idle facility costs decreased 9% compared to the fourth quarter. The increase in production of core DRAM products from Inotera contributed to the cost decreases as core DRAM products generally had a lower cost per bit compared to the portfolio average.

DRAM cost reductions in fiscal Q2 are expected to be in a high single digits and bit production is forecast to increase in the low teens including the supply from Inotera. NAND trade selling prices in the first quarter also improved significantly up 14% sequentially, this improvement in trade prices was partially offset by sales to our NAND partner Intel which are sold negotiated prices approximating cost.

NAND production cost per bit increased 8% in the first quarter compared to the previous quarter. As our 34 nanometer process technology achieved mature yields. NAND cost reductions in a fiscal second quarter are expected to be in the high single digits again and bit productions forecast to be relatively flat compared to the first quarter as we have reached full production on our 34 nanometer process and prepared transition to the next process note.

R&D and SG&A expenses for the first quarter came in at 8% and less than 6% of revenue respectively, both within our target range for operating expenses. SG&A cost in the first quarter increased compared to the previous quarter due to accruals in the quarter relating to the incentive pay compensation plans that I mentioned earlier. Future quarter should be impacted less by these accruals.

We anticipate SG&A expenses in the second quarter at fiscal 2010 to be around $85 million to $95 million and R&D expenses to be in $135 million to $145 million range. Other non-operating income in the first quarter includes a credit of $56 million which is a gain recognize through equity method accounting for interest in Inotera relating to their recent issue of equity securities at a price exceeding our carrying value.

Currency exchange rate loss in the quarter exceeded $20 million as the dollar weakened against euro, Sing dollar and yen. The first quarter enter with nearly $1.6 billion of cash on the balance sheet which includes the cash flow from operating activities of $326 million in the first quarter. We continue to generate positive free cash flow yielding $215 million in the quarter.

Operating cash flow was adversely affected by an increase in the quarter end balance of accounts receivable, which is partly due to the higher level of sales in the first quarter and partly due to a greater mix of sales to contract OEM customers as increasing demand from OEM customers is taking a greater percentage of our available production. Sales terms to our OEM customers are generally slightly longer then terms for our channel customers.

This led to an increase in our day sales outstanding compared to the previous quarter although it is still within our regular operating range. Despite significant production increases, inventory increased only 5% in the first quarter compared to the prior year end mostly in finish goods.

The net effective inventory write-downs did not have a significant impact on the margins in the first quarter and remaining affect the previous write-downs on any inventory balances as of the end of the first quarter is not significant. With respect to our consolidated joint ventures, distributions were made to JV partners and approximately $88 million in the first quarter, which consisted distributions from IM Flash to Intel.

With that, I’ll close here and turn the commentary over to Mark Adams. Mark.

Mark Adams

Thanks, Ron. I had mentioned that our last call that the demand signaled from our key customers appeared strong gain to the Holiday season and that as indeed, what we experienced in our fiscal Q1. For our third consecutive quarter, we experienced a strong increase in bit shipments in both our DRAM and NAND businesses.

The bit shipment increase was driven by continued demand improvement across most of our key markets including computing specialty DRAM in the consumer markets. In addition to the bit shipment growth in DRAM and NAND, we also saw as the improvement in both segments.

While the end of the Holiday season, it’s historically a time or demand can ease due to seasonality, demand for Micron product remained strong as we entered calendar 2010. Revenue from our personal computing business, which includes desktop computing, notebooks and netbooks, was up over 80% due to a strong price environment and a substantial increase in bit production coming from Inotera. Rummy of the core, DRAM markets, we saw continued growth in our server business with revenue up over 25% quarter-over-quarter.

Our networking and storage business achieved roughly 30% growth increase in bits shipped and remained the strong market for Micron, especially DRAM products. All in all, demand for Micron DRAM products remains robust as we continued to face allegation challenges our numerous designed IDs to support our strategic customers. We continue to see a shift towards DDR3 Memory in Q1.

Bit shipments of DDR3 product, increased approximately 60% quarter-over-quarter and this is after a Q4 what we experienced strong growth. DDR3 represented 40% of core DRAM bit shipments in Q1. Micron Technology in completed with the DDR3 possessing a unique competitive position to capitalize in the growth in DDR3 demand coming from both DC and server related customers. In addition to the growth in DDR3, DDR2 also grew in bit shipment in revenue during our first quarter.

Our mobile business continued during key impressive growth, revenue was up over 60% in the quarter. We see our Micron’s broad product portfolio products and at the mobile segment including mobile low for DRAM, MCPs, PSRAM products add on NAND based technology mobile memory cards remains a competitive differentiator as we look to expand customer in the segment.

For our pricing perspective ASP for our DRAM business were up significantly despite the mix shift driven by the commodity DDR 2 product from Inotera which has the lower ASP versus our portfolio average.

Inotera OEM contract price follow the spot market trends from our Q4 which held continue the upper trend in Q1 ASPs. We are seeing strong demand and price support from what we left Q1 with price is up 5% quarter-to-date versus the average of Q1. While there is some precedent from the past for seasonal drop in DRAM prices in our Q2, we are encouraged by the strong demand of stable pricing we have seen so far this quarter.

NAND from Micron Flash memory products remains strong as well. In Q1 here we all of our NAND products shipments were based on our industry leading 34 nanometer technology. We feel this technology provide us strong profit managed and that’s a latter of our NAND business continue making strong contribution to our operating results.

It is also worthy to note that Micron launched our real SSD C3100 product which represent the highest performance drive in its class on the market. This allowed us to cultivate additional design wind that hands out for a strong year in 2010 for SSD business.

We continue to be fleet with out retail business which includes the left our branded flash memory products. The crucial after market DRAM model operates in our world wining crucial.com eCommerce business. The price environment in the DRAM and NAND component markets as let the more stable pricing and consumer end user segment.

These combined market conditions have helped the retail business and Micron continue to make positive contribution in our first quarter. Overall we continue to see a relatively strong retail sector to the holiday season. Retailers are prudent in the inventory management coming out of last years challenging conditions.

In addition we are seeing improved sale through year-over-year and that’s remains bullish heading into the new calendar year. Great component pricing for NAND memory increased in Q1. Coming off an increasing ASP market for most of 2009 in NAND we managed to drive quarter-over-quarter NAND ASPs up 14% in Q1 by sales of most of our product yield OEM customers.

Although quarter they were seeing NAND ASPs down roughly 10% this is well with our expectations given the consumer driven seasonality of the flash memory. We continue to see the market migrate to higher density chips then we fill bit consumption will continue to grow throughout 2010.

It’s amazing to thing that in 2010 some smartphones are projected to ship with 64 gigabits of NAND Flash which is roughly the same side of hard drive and a notebook computer within last 24 months. We remain optimistic their market segments such as mobile, notebooks, and SSDs will continue to drive strong big consumption and that NAND market will be in balance during the course of 2010

As we quote the calendar year 2009, we may encouraged by the strong demand from all of our customers. We enjoyed our hubs and distribution channels remain very tight. We’ve mentioned that our recent calls that we felt the reduction in capital expenditures that we saw in 2009 will lead the more stability in our business. As we entered calendar year 2010, we are optimistic that these favorable market that useful conditions will continue.

With that, I’ll hand it back over to Kipp.

Kipp Bedard

Thanks Mark. We will now take questions from callers. (Operator Instructions) With that, we’d like to take questions.

It seems like you still got some pretty good headroom and execution on the DRAM spite, specifically with Inotera, but it sounds like your near term constrained in terms of your capacity, particularly, 34 nanometer for NAND. So, could you just help me out explain what the capacity is, or that strategy for capacity growth at NAND?

Is that 34 nanometer at this fiscal year and whether not you planned to revisit or where you are in terms of revisiting your CapEx budget plans first 2010? Where you are in terms of revisiting your decision about IM Flash in Singapore?

Mark Durcan

First of all on the 34 nanometer front, we continue to fine tune our operations as always to optimize any cap, slightly better cap loss or utilization, but new story for us in 2010 at this point is the transition of 2x node, which we have been saying for sometime will occur throughout the year. So that should drive.

It’s a pretty significant shrink went up and position to say exactly how big that is yet, but we seen will be sampling and you’ll have the access than information, but its pretty significant shirk force and should drive some pretty significant bit growth. Beyond that obviously, we’re looking at lots of different alternatives has to how we might add additional scoring to the silicon on a go forward basis, but we’re not really in a position to talk about exactly where or when that might occur at this point.

Gary Hsueh - Oppenheimer

Just a quick follow-up here, Ron, a question for you, just if you can help me understand some of the break points are, how you calculate the $0.23 number, obviously if I take 204 in terms of net income divide by 1 billion shares outstanding on, I don’t get $0.23, I guess $0.20. So, is there anything you can help me in terms of modeling on it converted basis on getting to that number? How I should model that going forward?

Ron Foster

First of all, we have to take the most diluted calculation and computing our EPS. So, the effect you see here is, you can get to by adding back the interest expense on the converts into net income and then dividing by the weighted average shares including the convert shares, which shows in your share deviser it with the one billion share count.

So, that’s are you get to the EPS number and we compute both with conversion as if diluted and without conversion to see which one has the most diluted affect and that’s the EPS number that we required report by gap accounting. So, if you give a little bit more specific perspective on how at works to be take our $1.3 billion convert, it will converts and NAND convert to accounting basis are about $190 million of net income.

So, since we are over $190 million the share count which was $91 million shares goes into our diluted shares and that’s $90 million of interest income they gets added back to the net income line and that’s how get to the EPS number on that particular convert we have to through each one to come up with the math the best way to approach.

Operator

Your next question comes from Daniel Amir - Lazard

Daniel Amir - Lazard

In terms of your DRAM can you provide time to mix between core and non-core mix of the past quarter and kind of where do you see that tracking into next year?

Kipp Bedard

In terms of core DRAM we are in fiscal Q1 that was up 45% revenue, specialty DRAM was around 13% and total NAND was around 33% was that ends up about 98 and the other 2% is captured in the royalty line. I am not stay way I think from given to any guidance on predicting more those goals because as you know there is so much it is related to the ASP changes.

Daniel Amir - Lazard

So, maybe a follow up question for that I mean where do you see the state of DRAM industry right now after a year that’s started in a very challenging talked about consolidation never consolidated really in Taiwan, but where do we go into next year and kind of how do you key the PC markets playing a roll in the DRAM industry.

Steve Appleton

With respect I think the state of the suppliers, we ended the year obviously in a pretty difficult situation and subsequently I would say probably within the 60 to 90 days or biting 2009 about a third of the world capacity came offline. Some of it, as you know never came back online, i.e. menthol bankruptcy and that is essentially a liquidated and most of those are gone or ready to not in production or never will be now or as you know, if you got the media TI basically, but all the use of 300 millimeter from the U.S. facility is now using until the capacity. So that never came back on and it’s been following in Taiwan.

I think all of the capacity at this point in time, the best we can tell, all the capacity that could have come back online is back online and those that have access to financing our funds are essentially just merging down the path of updated technology and those really, I would say Samsung and Micron that positive in the best position both DRAM and NAND and then the others, I’ll trying to figure out how to do that, but as you know, most of them never lot of debt that they’re also facing and trying to apple.

The interest analysis, last week taking with one of the CEOs in improvement business and I didn’t know the statistic, but if what I said was true, it’s the first time that never happened at least in try star in this business and that as of this moment, there are no new fabs in the constructions for the memory business and then nobody know well.

There are fabs that have been constructed, obviously Micron has the Singapore one and they’re optimizing the Inotera operation and so far so, clearly it was cut based to optimize to the sales that they already have, but down the hill I assume that there are just no new fabs in the construction in the memory business and that’s the first time I can ever remember that being the case, if I entered the business totally seven year ago.

So what happens in 2010 is always depending upon what happens in the broader economy and I would tell you that, I think some of the success that we’re experiencing now, which is due to our own competitiveness or due to a lack of supply in the marketplace. It’s one of those two things.

It’s not really because of demand so great is on fire and the economy is recovered because I think most people know that simply not the case. To the extent that we actually do get an economy environment that starts to recover that you have those of the variable circumstances for the memory industry.

Then with respect to how much the PC is going to play role going forward, I’m going to turn it back over to Mark Adams your comment.

Mark Adams

I think from a PC and even from a server sector, what we’re seeing is continue to upside on the commercial enterprise markets, continued investment on the infrastructure side was been very strong and only one if you could take advantage from proportionally a mix on the desktop notebook side of the house, things look a little bit better coming out December than we might have projected.

I think a lot of that has to do with company’s putting off purchases than the longer cutting off in that application as well, so in computing overall pretty favorable and we are sitting even slightly increased density for bob which is upping on the demand curve as well.

Operator

Your next question comes from Jay Lu - Auriga USA.

Jay Lu - Auriga USA

I got two questions, the first is, what is the maximum supply bit growth that you think is possible for 2010 for DRAM?

Ron Foster

The ranges we’re saying for DRAM are out there anywhere if it’s a wide range of 30% on the low end to about 50% on the high end.

Jay Lu - Auriga USA

So you think that a 40% life case?

Ron Foster

Probably, as you know, we’ve been chatting about a lot of that just depends on how successful each company is executing the shrink strategy.

Jay Lu - Auriga USA

My follow on question is your use of cash. As you generate in terms of cash, are you think about acquisitions again?

Kipp Bedard

I think that, currently we want to be pretty flexible in terms of how we think about what additional consolidation it can happen in the memory business. I think you can expect us to be fairly conservative as you might have imagine, a lot of accounts will be going in the 2010, we leverage our balance sheet a little bit in the last year or two and we’re still looking at, how much to be deleverage that.

In addition, as you already noted, we have some facilities they’re capable of taking additional equipment for capacity and we’re always of course looking at that and then M&A front, we still think there’s some opportunity out there. So, I would say that, we’re going to keep some of our powder dry at this point, as we look at these various alternatives, but currently we think we’ll be moving forward from a position of strength and being able to take advantage in advance in any of the directions we wanted to grow, but we as you know we think, we’re in a pretty good position in terms of what cash generation will report.

Operator

Your next question comes from Tim Luke - Barclays Capital.

Tim Luke - Barclays Capital

I was wondering, if you might be have to give a comment on you see inventory under OEM both in the channel broadly and coming out of the quarter maybe wondering both if you might have been and its provide some color on how you seen NAND did great for the period 2010, thank you?

Mark Adams

I will take the inventory question. Now I believe things are still very tight both in the OEM side and that’s we can see and our channel and as I mentioned in earlier comments in our hubs and it really across the board and all application we’re trying to do our best to meet the customer needs, but its I think a lot of its driven as Steve said demand is the demand as pretty good but not staggering upside in demand what we see is just a lot more prudent management coming in a last years down turn and the inventory levels being appropriate for the time and coming out of the holidays we are pretty tight going in the calendar year 2010.

Kipp Bedard

On the supply side we are seeing estimates of in the 80% to 90% supply bit growth in 2010 over 2009.

Tim Luke - Barclays Capital

How should we think about how you will approach your big great in direct board come with different element to come into your consideration and then lastly if I could get just squeeze in a last question on you had a very significant improvement in your gross margin what are some of the key variables in that going forward.

Mark Durcan

Let me cover the NAND capacity first. As our alluded to will see at least slightly more silicon in our existing fabs significant technology migration 2x node which, I think for Micron those two combined with drive less than the overall 80% to 90% if you will lumpy throughout the year depending on how it goes as relative to any new silicon that would be 2011 will released.

Ron Foster

On your gross margin question it obviously as I comment at the ASPs had significant effect in the quarter and pretty broadly across the board in all segments of our business I comment last quarter that we were in the black on gross margin and both DRAM and NAND and obviously where substantially better on both scores as we report this quarter.

We also had idle charges for example last quarter in our cost of sales in those are effectively zero this quarter as we taking in our full production assignment from Inotera and also working on the technology transition as we go through this fiscal year to get them up on our fab technology but in the mean time we are taking all the trend supply and doing well about the market as well. So, all of those contributed to the margin story.

Operator

Your next question comes from Jim Covello - Goldman Sachs

Jim Covello - Goldman Sachs

I guess first question is a little bit around the content pre box issue you toughed on it that you are seeing some good trends, but maybe particularly around some better than expected adoption of 64 bit Window 7 systems, if you could talk about what you see there currently and then in 2010?

Mark Adams

On the debt side of note booking net book arena, some of that overall PC landscape, we’d seen continued increased megabit persistent there. Obviously net book drags that down or wouldn’t in the lot more impressive, but if you go back into terms of overall ‘09, we didn’t quite break through 2.7 range, 2.8 range.

As we go into our first quarter, we’re anticipating that to be well over three megabit persistent for both desktop and notebooks. You’ll see that both of the corporate level and even if you do your retail checks, you can see advertise of four megabit systems at pretty good ASPs on the desktop level. The net book piece will took and drive itself to be a low density operating. So all-in-all pretty favorable and certainly better, I think the projections were about six to 12 months back.

Jim Covello - Goldman Sachs

So, even though we’ve really kind of the theoretical limit of what you could use in attribution of notebook or desktop is kind of net through two to three, four ranges? You’re still seeing people go to four. I guess again, if you could talk a little bit about the 64 bit operation system adoption? How you see that right now? Where you could see that goal and what that could need for DRAM content looking forward?

Mark Durcan

I think this is a first Christmas that we’re seeing as a result. I’m not sure, I have all the day, but the adoption right now is pretty strong. So we feel really good about that. I was talking your original question in terms of the contact of where we got for today. We still work pretty good about that adoption both of the corporate level and even in a consumer level instead on all displaced on OEM side, but then maybe Microsoft in the desktop to drive that increasingly. So we feel pretty good about that, but we’ve already got some headway going into we think overall can be very, very positive for us in 2010.

Jim Covello - Goldman Sachs

Then maybe final question from me, if the incentive for the OEMs to adopt 64 bit systems of the customers can be buying 64 bit systems right now, so the future proofing the systems could delays many software written right now to take advantage of 64 bit, but it’s just a situation while people kind of thinking ahead open that we expect software to be available or is that some of that’s currently driving what, from a lot of people on the supply chain better than expected adoption in the 64 bit at this point?

Mark Durcan

I think future group holds a lot of water. I would also suggest that, from a channel perspective when people were upgrading their desktop and notebook purchase in their next generation for full system, when I look at the behavior there, they’re certainly looking to add value in the channel side of that business to up sell customers and the people that consumer making the decision is causing them to make that buy at a pretty significant discount at time of purchase versus they have to go back to that downstream.

Operator

Your next question comes from Uche Orji - UBS.

Uche Orji - UBS

Can I just start by asking you about a comment you made on your server business and your revenue growth of 25%? Can you just put us in context of what’s driving the demand and what else kind of incorporates blushful of Q for Q4, or whether this is setting up for as fairly interesting refresh cycle for service or any comment from the server demand that would be helpful?

Ron Foster

Yes, I mean the best comment I could say is that, we were in constrained a number of our product segments that I think server was the leading products in terms of our allocation position we’re in as a company. We gotten multiple upside forecast from just about everybody. So we don’t think it’s a tug of war in between share gains between customer A and customer B. The upside seems to be across the broaden business and ultimately, we could have used a lot more product to ship in the quarter.

Our forecast for foreseeable future out in Q1 and Q2 calendar year remained very strong. Both in terms of density, but also in terms of just a number of raw units and it seems to me that the lot of the infrastructure dollars that the government put in place on a global place, is taking hold and where a lot of the dollars being spent both in the enterprise and networking space is driving tremendous upside versus what we might have forecasted it back in the first half of 2009.

Uche Orji - UBS

Another question please, so on your bit demand, your projection for bit supply for Micron, can you tell me how much you think will be to grow net quarter and also where you think you’ll come out by the end of fiscal 2011 and taking into consideration Inotera as well outside. Just trying to make sure I understand, if you can just help us understand how you expect to say that and obviously if you can talk about CapEx. Decreasing of your CapEx, as you can backend loaded or do you have some its way through the year?

Mark Durcan

Sure, on the production side, next quarter will be up low teens and we’re stand away from a full year-over-year number for now. As we have stated, we have a strong growth profile, I think Mark’s mentioned in several conference calls, not only due to our own shrinks, but also the capacity coming on it in Inotera and their shrinks as well. In terms of CapEx as Ron’s mentioned before, it is backend loaded and I’ll turn it over to him for additional details.

Ron Foster

Yes. As we previously said, our guidance for the year is $750 million, $850 million. We spend about $111 million in first quarter. So it’s heavily backend loaded and of course we’ll be monitoring our technology transitions and timing, which can affect that and pull things in or out slightly in the fiscal year. So that’s the range we’re predicting.

Uche Orji - UBS

Just one last question, can you just tell me in terms of your gross margin for core DRAM versus NAND? Just tell me, where the gross margins rank at the moment?

Steve Appleton

As you know, we don’t break them out, but we do rank them for you. We had a real strong quarter has been alluded to by both Mark and Ron on specialty DRAM. So we are No. 1 gross margin. If you look at just our trade NAND, it would be No. 2, core DRAM after that and Imaging after that, and of course topping a list would be the licensing royalty category.

Operator

Your next question comes from David Wong - Wells Fargo.

David Wong - Wells Fargo

Can you give us some idea of what your PC customers are indicating in terms of their bit requirements for the calendar March quarter?

Mark Adams

Going back to my earlier comments, we’re not seeing what might be traditional seasonal pullback in Q1. We’re seeing continued strong demand coming out of the holiday end of year, both in the PC side and the server side, really across all of our segment. We’re not seeing any pullbacks on the demand forecast going into our calendar Q1 and end of our Q2. It seems very strong and support, the best we can see throughout the remainder of our quarter here.

David Wong - Wells Fargo

What were your weeks of inventory for DRAM and trade NAND exiting the quarter?

Mark Adams

We’re running at real minimum. We’re running less than a couple of weeks in both DRAM and NAND.

Operator

Your next question comes from Vijay Rakesh - Thinkequity.

Vijay Rakesh - Thinkequity

Just going back on your license side, given that almost like growing bit growth 70% for 2010? Just wonder what your license expectations you have on the quarterly run rate for 2010?

Ron Foster

We have about $35 million in license revenues. I mentioned, this quarter similar to last quarter. Those are approximate trajectories as we look through the year ago in terms of the payments for our technologies to this point, but don’t have any further adjustments or change to that trajectory to fall on at this point.

Vijay Rakesh - Thinkequity

Going back to the Windows 7 comment, I mean just a little bit. I mean do you have instead of first Christmas, what personally a box that you think approximately a shipping with a higher density per box? If things start to working at favorable, that percentage could go as to move to 2010?

Ron Foster

I think the first of them, if market likes to jump in, we’ve seen various report. It looks like total systems and you’re looking at about 2.7 gigabits expectations for the year or to average some more involves with three-two or three range. Anecdotally, I can tell you that probably had between that last two or three conferences, chatting with people who have bought new systems and here ranges up 9 gigabits to 16 gigabits per system.

Now, you guys are pretty powerful users, there’s just anecdotal information to maybe match we have marks. We haven’t seen that demand at the per unit level, but the bit shipment demand that I suggest is pretty healthy is reflective of a trend down that path. We haven’t seen the per unit plus density being around nine or 16 in that range, yes, but we are seeing the forecast from our customers to be pretty staggering from year-over-year from 2010, when we look back at 2009. I think, a lot of that is reflective on the desktop side of that growth.

Vijay Rakesh - Thinkequity

One last question here on the NAND side, what’s your expedition on bit growth for 2010 for the industry and for you?

Ron Foster

We’re again go stay away from Micron prediction, for next quarter it’s fairly flat for us for the industry. We think supply is going to be up about 80% to 90%.

Operator

Your next question comes from Kevin Cassidy - Thomas Weisel.

Kevin Cassidy - Thomas Weisel

I wonder, if we could change topics a little bit and talk about the RealSSD. You mentioned design winds can you say who they are?

Ron Foster

Yes, normally we don’t comment on those. I will tell you that, obviously we launch the products we’ve been working with some key OEMs on the development ahead of our launch. There are significant customers and we are very excited about the progress over last quarter.

Kevin Cassidy - Thomas Weisel

It’s mainly desktop right are in the book?

Ron Foster

Today, the current design winds that I’ve referred to you were desktop with the announcement of our client product RealSSD 300.

Kevin Cassidy - Thomas Weisel

Can you give you an estimate of what percentage of revenue will be significant this year?

Ron Foster

Again, it gets mentioned a few times in the goal. We don’t normally forecast out that far, or I’ll tell you is that, we’re very pleased and I would say the business be ahead of our plan that we had during the year.

Operator

Your next question comes from Hans Mosesmann - Raymond James.

Hans Mosesmann - Raymond James

I’m going back to DRAM. The transition of DDR3 and DDR2, how different is it relative to other DRAM transitions in the past that you went from DDR to DDR2 and then from DDO, I guess the DDR and so there seems to be some differences here. What are the implications through the DRAM industry?

Steve Appleton

It’s been I think, pretty normal overall from what we’ve experienced before. Obviously, the transition, it’s been upon the application and the price points are trying to target and so forth. We in terms of moving forward from here, I think it’s going to finish out so to speak, to be pretty normal process over the next year.

Hans Mosesmann - Raymond James

Then from a supply perspective, there’s no difference. It seems that a lot of supply out there may not be capable of DDR3 and could there be more shortage in that area than history would suggest?

Mark Durcan

I think you’re exactly right. Number of competitors can’t really deliver DDR3 without 50 nanometer that constrained at some of those same competitors and unlikely to be a swage tool. Some of those competitors will have difficulty participating in that market.

Operator

Your next question comes from Bob Gujavarty - Deutsche Bank.

Bob Gujavarty - Deutsche Bank

Just a quick recap, do you mentioned demand cost reduction in the quarter was high single digits? Did I hear that right?

Mark Durcan

Yes.

Bob Gujavarty - Deutsche Bank

Just a quick point on NAND, it’s been a couple of quarters. You’ve had pretty good pricing. RealSSD has always been a big powerful meditative for NAND. Is it encouraging you that you’ve been able to see good demand despite the price increases? Can you talk a little bit about the trade off you’re seeing in your customers between price and capacity?

Mark Durcan

The difference we’ve seen really in the applications that traditionally have consumed a lot of NAND. While the densities went up, the street pricing helped pretty much throughout the year. The normal vehicle, when you talk about, I think you really referring to retail versus distribution, the normal mechanism to enforce that as through some type of price rebate or price protection.

I can tell you, across the Board and retail, they were unable to do that, use that mechanism to manage price curve. So we actually had significant demand of the higher density, but it didn’t drive pricing down. So it wasn’t very surprising to see that happen, because the applications stayed very strong.

In addition to that, when you look at some new applications online, i.e. smartphones numbers of smartphones are shipping with 32 gigabits of Flash Memory, there hasn’t been an application like that in flash ever in existence. So you had a combination of some real applications of MP3 and photography in USB that have been around for while legacy applications with the growth and things like smartphones in the evolution of the introductions of SSDs, it created a pretty robust pricing environment and demand curve.

Bob Gujavarty - Deutsche Bank

Just a real quick one, what’s your PC units working assumption right for 2010, just a would be fine?

Mark Durcan

I’m trying and quite catch that question. PC unit…?

Bob Gujavarty - Deutsche Bank

Yes, what’s PC unit growth that the phase for 2010?

Mark Durcan

We’re hearing from customers probably somewhere in the range of anywhere from 12% to 16%.

We had a couple of questions first of all, the Inotera volumes, where we had in terms of that ramp that here only are in the call that is now fully ramped, because you don’t have vital facility charges or do you have more to go? That’s the first question and then the second question is relative to your royalties. At what point that do we see a step function increase, because if we understand correctly, when Inotera makes the transition to your technology that could be meaningful increase in those royalties?

Mark Durcan

On the piece, relative to capacity online, Inotera is essentially fully ramped at this point. Given effect that we have to have a certain amount of capacity offline to effectuate the transition to start the event, so there’s a small amount of tools that have come out place, so we can install mutual to affect the transition at 50 nanometers and that’s progressing well. Relative to the 50 nanometer transition, I think the lot Inotera comment on exactly how that’s going, other than to say, we have a pilot line up in running and we’re very satisfied with where that transition is going.

On royalties, I’ll let Ron handle the royalties.

Ron Foster

Yes, as I mentioned earlier, right now we’re getting royalties for previous technologies and you are correct as I previously communicated there is a formula for future technology rollouts and payments on a revenue basis relative that technology rollout. So it will be a function of that revenue and timing of the new technology notes in the ramp up as well as in the ramp up as well as the revenue levels, so many specific call out on that.

Bill Dezellem - Titan Capital Management

So to make sure we’re understanding or you think about this that Inotera volumes are essentially at a level they are going to be until the benefit from putting your stack technology in fab is in place, at which point there will be volume growth, they will come from that. Concurrently, that would also then lead to an increase in your royalties, but the timing of either those activities you’re going to step aside from discussing? Are we hearing all that right?

Steve Appleton

Yes. Those are currently assumptions. As we should get substantial growth from next generation technology as that rolls out and there’s a formula related to that.

Bill Dezellem - Titan Capital Management

Then a final question, can you reconcile for us the finished goods being up and yet being on allocation? I think there’s a piece of the puzzle we’re missing?

Steve Appleton

It’s pretty easy, but if you look at the increase and wafer output from Inotera related to win and then also finished goods servicing a higher shipment level to customers. I think overall inventory was only up 5% and there wasn’t substantial growth in overall FGI. So there was some growth related in Inotera, just reinforcing chipset.

Operator

Your next question comes from Atif Malik - Morgan Stanley.

Atif Malik - Morgan Stanley

If I look at the DRAM costs of the percentage of PC box somewhere around 7% to 8% versus you think more normal levels of 5% to 6%. Do you think OEMs are in a position to transfer some of the costs from memory, also LCD pricing that’s kind of inflecting to the consumer if the loading keeps on going up and the price remain stable at these levels?

Mark Durcan

Yes, I think we do. I think as we just talked about earlier in the call, the 64 bit phenomenon and we looked at people who have kind of forged on a tough 2009 in terms of PC purchases across the Board in consumer and in enterprise. We think that there’s an opportunity for that. We certainly don’t see any behavior at this point of driving densities downward. In fact, we’ve seen the contrary. So at some point, we understand that dynamic would be there, but we don’t think we’re there yet.

Atif Malik - Morgan Stanley

Then a question on the supply side, there’s a perception out there that the supply is bottleneck by lithography tools? I just want to get your costs that as you guys are kind of contemplating your plans on the NAND side. Do you see any issues with you not getting the slots for the lithography tools, if you don’t make up your mind on NAND expansion right now?

Ron Foster

We I think are in a pretty good position and hence already been dialoging with the suppliers over the last number of months, if you will. So I don’t think it’s a bottleneck for say for us, I think it might be in the event those in the industry that haven’t really looked it upgrading their equipment weren’t with some issue, but I think it is general true that lithography is the longer lead time item of the all the equipment that you would have buy.

I guess I could differ to the litho guys to with which to that they think their lead times are, but our experience at the moment is, that if you go in order a piece of litho equipment and the caveat I’ll give is that, we’re talking about most of started to have. If you want to go in order the most advanced step that they have, it’s probably going to be in the neighborhood of 10 months maybe 12 months. If much of that happens at all, then as just going to keep push it out from there.

Atif Malik - Morgan Stanley

For your supply goals for next year, you’re not bottlenecked anywhere?

Ron Foster

We already have our deliver side, fatherless Inotera has been in plan for the converting for sometime and so forth, so that’s all said up already.

Atif Malik - Morgan Stanley

The last one that, can you tell us, DDR3 migration to netbooks where is that, when is that?

Ron Foster

I’ll turn it over to Mark to answer, but I said one other thought real quick as if I were on the last subject. The other thing in terms were on you talk about the bottleneck. I think ordering equipment and getting as you had some lead times that I just described, but assumes if you have the money if go do it and the equipment leasing business if you will, which is how a lot of companies finance there, equipment acquisition is historically that market is completely shutdown.

When I say that, I’m talking about the GE capitals etc. I’m not essentially zero to a very little of any of that available to even companies like Micron and portion of that will go down that route, but if these companies are trying to go and get funds if which to upgrade the technology, that markets close and as you know, the other ones are pretty difficult for number on. So the whole lead time discussion is kind of move, if that will have more to go out next two phases network. Mark.

Mark Durcan

So on the netbooks convergent to DDR3, I think, by virtue of tight supply of DDR3, that will be a lagging platform if you will and these yellow side as that is, you got price point as you to round. You also have the application uses that might not warrant if where you seen the push on DDR3 in notebooks and desktop as well. So it’s bet of constrain as well as just the raw application being used for the netbook today to get a price point.

Operator

Your final question comes from Manish Goyal - CREF Investments.

Manish Goyal - CREF Investments

A couple of questions, first if DRAM price is to stay, where we are today in the second quarter, what will be the sequential increase in average DRAM prices for the quarter?

Ron Foster

We see price is up 5% quarter-to-date Manish.

Manish Goyal - CREF Investments

In the call you said, in Q1 the demand looks better than seasonal and then are you dealing the quarter? If you comment that much of the capacity that was taken off line or you did in 2009, is that a line? Do you feel stock price is slipped lower, what you’ll see from that?

Ron Foster

I’ll answer a part of that and then Mark will answer the other part if he actually heard. First of all, we didn’t say that all the capacity was back online. I said that the capacity, that which capable occurring back online. It was back online and interesting part of that is, a large part of that obviously particularly in Taiwan is on the older technology. It came back online, but it didn’t comeback online in a more advanced technology, which has historically been the cases comeback online in older technology because we’ve already to buy the equipment to upgrade.

Mark Durcan

Your question about the activity in the stock market, would you really have is two classes of product here. You could imagine when that capacity you referred to was off line. You’re a major OEM customer, looking at your supplied based in a little bit concerned about the ability for some one that tier 2 supplier to be able to service demand.

So what you now have is that additional capacity come online, but not with OEMs, because OEMs can’t toggle back and forth as quick. So what you have is two tiers of OEM pricing. You’ve got your OEM contract pricing and you’ve got the spot market, low grade tier 2 DDR2 products that’s coming back on the market, which probably can’t warrant the margin and know the volume support.

So companies like Micron has been add for our customers to increase our share at major OEMs. The demand is very robust. The fact that there might be some available spot market material is just byproduct of that additional demand coming back on with no real OEMs.

Kipp Bedard

I’d like to thank everyone for participating on the call today. If you’ll please bear with me, I need to repeat the Safe Harbor protection language. During the course of this call, we may have made forward-looking statements regarding the company and the industry. These particular forward-looking statements and all other statements that may have been made on this call that are not historical facts are subject to a number of risks and uncertainties and actual results may differ materially. For information on the important factors that may cause actual results to differ materially, please refer to our filings with the SEC, including the company’s most recent 10-Q and 10-K. Thank you.

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